BPK member Rizal Djalil said the government failed to meet its renewable energy mix target last year due to complications in permits, credits, tax stimuli and acquisition of land used for renewable energy-based plants.

“In some countries, the government provides land for independent power producers [IPPs] free of charge, whereas IPPs here need to obtain the land by themselves,” Rizal said on Tuesday.

Indonesia’s renewable energy mix reached only 7.7 percent of the targeted 10.4 percent last year.

With an average increase of 0.54 percent annually, Rizal was pessimistic that the government would reach the energy mix target of 10.9 percent this year, let alone at 23 percent by 2025.

Another major issue at stake, according to the BPK’s report, is related to the build, operate, own and transfer (BOOT) scheme for IPPs and the power purchase agreement (PPA) system under the management of state-owned electricity company PLN.

Rizal said the BOOT scheme could serve as a disadvantage to renewable plant developers as they would have to give their facilities to PLN after 25 years of operation at a mere price of US$1,000 — regardless of the risks and burdens they have had to bear.

He suggested that the Energy and Mineral Resources Ministry, which is in charge of Indonesia’s renewable energy implementation, exempt developers from the obligation of transferring their plants to the state.

Rida Mulyana, the ministry’s director general for new and renewable energy, said his institution was open to the possibility of removing the transfer obligation and leaving the option to renewable plant developers.

“PLN itself has considered the fact that looking over that many plants in the future might be too burdensome,” he said.

Stressing that the ministry would take all of the BPK’s recommendations into account, Rida said his institution was partnering with the Finance Ministry to work its way around a 2010 Finance Ministerial Decree stipulating that power plant projects worth more than Rp 10 billion (US$736,000) were subject to President Joko “Jokowi” Widodo’s direct approval.

“We are trying to fix that particular rule because a Rp 10-billion project is too small in today’s value to be prioritized directly by the president,” he said.

A policy paper published by the Office of the Coordinating Economic Minister, a copy of which was obtained by The Jakarta Post, suggested that the Energy and Mineral Resources Ministry revise Decree No. 50/2017 on renewable energy for electricity procurement, as it had failed to boost investors’ appetite in the renewables business.

The decree, published in August, sets a price cap on electricity from renewable sources — except geothermal, hydro and waste — at 85 percent of the local electricity supply costs (BPP) if it is higher than the national average.

The paper says that it looks as if the pricing policy was introduced to make renewable electricity prices more competitive, especially compared to the price of electricity generated from conventional sources of power, like coal, but without considering that renewable plants are more environmentally friendly

“We need to have a strong policy as well as support from international communities and the banking sector to lower the cost of making solar photovoltaic, for example, said Toshiyuki
Shirai, a senior energy analyst at the International Energy Agency (IEA).

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